Ex-Home Depot Chief Taking Reins at Chrysler

By MICHELINE MAYNARD and NICK BUNKLEY

Published: August 6, 2007

Robert L. Nardelli, who was ousted as chief executive of Home Depot amid shareholder discontent this year over his enormous pay package, will soon take on one of the most prominent jobs in corporate America: revitalizing the troubled automaker Chrysler LLC.

Chrysler's new owner, the private equity firm Cerberus Capital Management, chose Mr. Nardelli because of his turnaround expertise, people with direct knowledge of the Cerberus plans said Sunday night.

They said he would bring fresh eyes to the carmaker, which was sold by the German automaker DaimlerChrysler after nine years of ownership because of growing losses at the United States company, which now ranks fourth in the American market, behind General Motors, Toyota and Ford Motor.

For Mr. Nardelli, the appointment provides an opportunity to burnish his reputation, which was damaged by a contentious relationship with shareholders and ended with him departing with a severance package worth $210 million, some of it to offset benefits lost when he was hired from General Electric.

For Detroit, the hiring brings a high-profile executive to one of the most closely watched and politically sensitive automotive jobs at a critical moment for the United States auto industry, which continues to lose market share to Japanese automakers.

Mr. Nardelli will be the second chief executive hired by a Detroit car company from outside the auto industry in the last year. Last fall, the Ford Motor Company hired Alan R. Mulally from the jet maker Boeing.

Mr. Nardelli's entire compensation package will be based on Chrysler's performance; he will not be paid if the company, which lost $1.5 billion last year, does not improve, people with knowledge of his appointment said.

It is not known how much he will make if he succeeds in returning Chrysler to sustained profitability. But executives at companies owned by private equity firms typically get a small ownership stake. Thus, they can be compensated generously if the business thrives.

The Cerberus purchase of Chrysler and Ford's hiring of Mr. Mulally, previously head of Boeing Commercial Airplanes, underscores that it is no longer business as usual in Detroit.

Indeed, foreign auto companies passed the three Detroit automakers in July sales to hold more than half the American market. Chrysler, which slipped to fifth place in the American market last month, behind G.M., Toyota, Ford and Honda, had already rolled out a restructuring plan last year.

But more radical change may be needed at Chrysler, and indeed, at the other Detroit companies, which recently began negotiations on a new contract with the United Automobile Workers union. The outcome could determine whether the American companies stabilize or shrink even more.

In buying Chrysler from DaimlerChrysler in May, the chairman of Cerberus, John W. Snow, vowed that his firm wanted to help the auto industry regain its prior strength. Despite the initial fears of union leaders that Cerberus might ''strip and flip'' Chrysler, selling it off in pieces, Mr. Snow denied that such plans were being made. Indeed, Ron Gettelfinger, the labor union's president, ultimately endorsed the deal, after initially vowing to fight private ownership.

The management changes at Chrysler are expected to be announced Monday morning, when Chrysler plans to celebrate its return to American ownership and independence from Daimler AG of Germany, which bought it in 1998 for $36 billion in a trans-Atlantic attempt to form a dominant auto company.

That deal closed on Friday. Mr. Nardelli replaces Thomas W. LaSorda, chief executive of the Chrysler Group. Mr. LaSorda will now serve as vice chairman and president, the people with knowledge of the plan said.

The appointment of Mr. Nardelli is a surprise both because of his lack of automotive experience and the circumstances under which he left Home Depot. Mr. Nardelli became chief executive at Home Depot in 2000.

Under his leadership, the chain doubled its sales and the number of stores that it operated around the world. But its stock price stalled, and questions arose about his leadership and his high pay. His final months at Home Depot were tumultuous.

''It's not unusual when you have a change of ownership that you'd have a change of management,'' said John Casesa, an auto analyst in New York. ''With this change of ownership and everything that's happening in the auto industry it's reasonable to expect that a financial investor is going to have a very aggressive plan to change the business model.''

More than any other Detroit company, Chrysler remained dependent for too long on big sport utility vehicles and pickup trucks. Despite hit cars like the 300C and PT Cruiser, Chrysler's sales plummeted as gas prices rose.

Though it has introduced new cars this year, Chrysler has been overshadowed by companies like Toyota and Honda that are building more fuel-efficient vehicles.

Last month, news organizations including The New York Times reported that Wolfgang Bernhard, a former Chrysler executive, would return to become chairman, based on information from people close to Chrysler.

Mr. Bernhard had served as an adviser to Cerberus in its deal to buy Chrysler. Further, Mr. LaSorda was expected by Chrysler officials to remain as chief executive, although Cerberus had never said explicitly that he would remain.

For his part, Mr. Bernhard rejected the offer to pursue other interests, people with knowledge of the situation said.

Before joining Home Depot, Mr. Nardelli was a top executive at G.E. But he lost a three-way race to replace the retiring John F. Welch as chief executive. He held various management positions in G.E.'s appliances, lighting and transportation systems departments.

The Cerberus chairman, Mr. Snow, had expressed support for Chrysler's existing management team, particularly Mr. LaSorda, who had been Chrysler's chief executive since the start of 2006.

Mr. LaSorda's job security appeared fragile last year, when Chrysler lost $1.5 billion and built 100,000 more vehicles than it had dealer orders for. Senior executives at Chrysler said Mr. LaSorda might be promoted to a job with the company's then-parent, DaimlerChrysler.

Departures from Chrysler are already beginning. On Sunday night, people with knowledge of the situation said that its chief operating officer, Eric Ridenour, would leave, and the former head of global purchasing at DaimlerChrysler, Thomas W. Sidlik, is departing as well.

Photo: Robert L. Nardelli, who was ousted at Home Depot over his pay, will lead Chrysler. (Photograph by GENE BLYTHE/ASSOCIATED PRESS)